Hanover rejects Allentown's arena settlement offer

But Allentown remains optimistic settlement can be reached.

Preparation for a new hockey arena in downtown Allentown continued Tuesday… (Donna Fisher/The Morning…)

May 22, 2012|By Scott Kraus and Matt Assad, Of The Morning Call

Hanover Township, Northampton County, dealt Allentown's hopes of a quick end to its paralyzing legal battle over plans for a downtown hockey arena a second setback in as many nights Tuesday, joining Bethlehem Township in rejecting the city's latest settlement offer.

And the Hanover supervisors made it clear that the time for negotiating is over.

That might seem like a demoralizing blow to a project that once appeared inevitable, but arena supporters aren't showing it.

Allentown Mayor Ed Pawlowski and state Sen. Pat Browne continued to publicly express optimism that the dispute over the use of earned income taxes paid by suburban residents working in a 130-acre downtown zone to fund arena construction and urban revitalization can still be resolved.

In a statement released after the Hanover meeting, Pawlowski said: "My goal remains to resolve this through continued negotiation that addresses the best interests not only of the individual municipalities and townships but also of the greater good of the entire region."

That's despite township officials' statements that there's no way to do that short of a judge's ruling on the legality of the law that created the zone, or a legislative fix that addresses their concerns about its constitutionality and removes from the mix all earned income taxes paid by non-residents of Allentown.

"We honestly gave it a fair shot to see if there was some common ground to resolve this outside of litigation, and the conclusion is there is not," said Hanover Supervisor Glenn R. Walbert. "Hopefully this thing is handled in an expeditious manner in the courts and everyone can get on with their business."

Browne said he expects that in the next two weeks the city will finally be able to tell the townships exactly how much of their earned income tax is at stake — a number that has been missing from the debate — facilitating a deal that will avoid a long legal fight.

"The primary concern is the return of their EIT money," said Browne, R-Lehigh. "Once we can identify precisely what their exposure is, and assure them that they will get 100 percent of it back, it will add an element of certainty to the talks. I think we should all wait for those numbers before we close the door on any settlement."

But Walbert said that while those numbers might have helped earlier in the negotiations, they won't now.

"At this point, the law needs to be fixed," he said.

To date, 13 municipalities and the Whitehall-Coplay School District have joined Hanover and Bethlehem townships in a lawsuit that seeks to prevent the city from tapping their residents' earned income taxes. The Pennsylvania State Association of Township Supervisors also has asked Commonwealth Court to be added to the litigation.

Two other municipalities, Upper Saucon Township and Catasauqua, filed a second lawsuit last week, adopting many of Hanover and Bethlehem townships' arguments and adding a few of their own. Developer Abe Atiyeh has also filed suit to stop the zone.

The Neighborhood Improvement Zone was created by a 2009 state law that allowed Allentown to establish a 130-acre area in its downtown where all state and local tax revenues, excluding property taxes, could be tapped to finance redevelopment and build a hockey arena.

Suburban officials learned in January that the local taxes swept up in the zone included local earned income taxes paid by their residents that are normally returned to their home municipalities. In March, Hanover and Bethlehem townships filed a challenge to the law in Commonwealth Court. The suit said the zone illegally taps their residents' taxes and violates the state Constitution's ban on laws crafted for individual municipalities.

Hanover and Bethlehem townships have suggested Allentown should shrink the size of the zone, removing a 90-acre swath of land along the Lehigh River waterfront as part of any settlement, but Browne said shrinking the size of the zone is not on the table. The 130-acre tax incentive zone was designed to revitalize the city, and Browne said he's not willing to compromise that.

Walbert said Hanover had initially suggested that if the city limited the zone to the single downtown block that would be occupied by the arena, the township could agree to forgo the local earned income tax the zone generated, but Hanover no longer sees that as a solution.

Referring in particular to the riverfront brownfields, Browne said: "The size of the zone is final. It includes some of the most economically challenged property in the state. It's been in decline for 50 years and if we remove it from the zone, it will continue to decline. That's not effective public policy."